Many funds are available through third-party distributors known as ‘platforms’, who attract new investment for the funds by distributing them, via IFAs, in return for a fee. Press reports have suggested that some platforms are providing additional ‘shelf space’ to certain fund managers, by featuring them on preferred lists, or providing them with higher visibility online.

The standard fee for such services is 0.25% but some platforms are allegedly receiving additional payments from funds managers that can take these payments to 0.4%.

The reports have emphasised that only financial planning advice from an independent source can properly measure funds performance and fees, and provide customers with a genuinely balanced view of a funds or investment product.

The need for good, objective funds analysis has never been greater. The number of underperforming investment funds (so-called ‘dog funds’) has risen rapidly due to the recent stockmarket slump and in March 2010 there were 90 such funds on the UK market, up from 77 in October 2009. Some of these funds were among the largest in the UK, by assets under management.

It is therefore essential to seek independent financial advice from a company with a fund analysis capability, which provides advice based on first-hand analysis of a fund’s investment weightings and an objective view of the quality of management of the fund.

Principle First offers a portfolio analysis service for those with existing funds investments, as well as analysis-driven independent financial advice on funds and the Principle First range of funds portfolios to suit all risk profiles.

You can obtain independent financial advice on funds and investments by making an investment enquiry online or by ringing freephone 0800 678 5929 now

A new poll for the Barnardo’s, the children’s charity, has this week revealed that while 58% of the general population have no will, almost three-quarters (74%) of cohabiting couples have no will in place.

Barnardo’s indicated that a third of those who had neglected to write a will said they had simply “never got around to it”.

Writing a will is crucial for good inheritance planning. It will ensure a smooth inheritance process for your family. If you have no will in place, you have made no formal plan for dividing up your estate, when you die.

Having no will in place could leave large portions of your wealth subject to inheritance tax, which is paid at 40% on any funds above the tax threshold (currently £325,000 per person or £650,000 for a married couple).

While this tax threshold, or nil rate band, for inheritance tax may sound generous, it is important to remember that it is levied not only on your property, but on your entire estate, which includes payouts from insurance policies, and other savings and investments as well. Consulting a financial adviser for qualifed inheritance tax advice is an important element of inheritance planning, and essential to avoid inheritance tax.

A will can also be used to nominate preferred guardians for children, if they are orphaned before they turn 18.

The Barnardo’s research revealed that 25% of over-55s surveyed believed that all their wealth would pass to their family, even with no will in place. However, if you die without a will, specific rules apply to dividing your wealth, and a surviving spouse is not automatically entitled to inherit everything.

In the case of a married couple in England and Wales, the surviving spouse receives only the first £125,000 from your estate, plus a half of the remainder, with the other half of the remainder passing to the children when they turn 18.

*Source: Barnardo’s survey of 2,221 UK adults, March/April 2010

These are the conclusions of the charity Elizabeth Finn Care, which specialises in assisting professional people in need of financial and emotional support due to changes in their circumstances.

The charity compared the expectations of two groups, consisting of professionals in the above age range, and a group representing the parental generation of these professionals (i.e. people aged 65-75 with children).

Of the professionals surveyed, 51% said they would encounter financial problems if they did not receive their expected inheritance. Three in 5 said they were counting on receiving between 71% and 100% of their parents’ wealth.

The reality is likely to be very different, however, as only 27% of the parents’ group declared they would be in a position to bequeath such a large portion of their estate.

Elizabeth Finn’s research has also uncovered a widespread lack of understanding among the professionals of the value of the state pension and the cost of care in old age, with 55% declaring they believed their state pension would cover the cost of a nursing home bed.

The basic state pension currently pays £95.25 per week, compared with an average cost of £540 per week for residential care, the charity said.

The conclusion was that reliance on inherited money as part of retirement planning is a false expectation, and provision for retirement through a personal pension, or other investments, is essential.

*Source: YouGov survey for Elizabeth Finn Care of 1051 professionals aged 35-45, and 539 adults aged 65-75 with children

Much of the land held by native Americans (formerly known as American Indians) is held in group ownership, a legacy of the days when John Wayne conquered the great plains, and native Americans were not permitted to write a will.

Large parcels of tribal land came from ancestors who handed the land down to their descendants as tenants-in-common.

The result has been chaos, and today it is common for one small parcel of tribal land to have many hundreds of individual owners.

The US government is now striving to consolidate ownership with a programme to enable native Americans to buy from each other, so that the number of owners for each parcel is reduced. The new owners of the larger land parcels would then have the ability to preserve their land bank intact, by passing it on in their will.

Writing a will

Here in Europe, writing a will is equally essential for ensuring an efficient and orderly asset transfer to those precise individuals we wish to nominate as our heirs.

Dying with no will in place is known as ‘dying intestate’, in which situation the government takes over the distribution of your assets under the ‘rules of intestacy’.

By ceding control to the government in this way, your spouse and children may receive only part of what you intended, and if you and your partner are unmarried, your partner is automatically entitled to nothing at all – the notion of a common law wife or husband is a myth.

Making a will under the guidance of your financial adviser can also protect you from Inheritance Tax at 40% on parts of your wealth when you die, and in your will you can also nominate guardians for your children, if they should be orphaned before the age of 18.

There are currently £2.5 trillion in assets earmarked by parents as inheritances for their children and relatives, the insurer announced this week.

This staggering sum is held by two-thirds of over-55s covered by an Aviva survey*, with 58% of those questioned wishing to bequeath assets to their family and 46% mentioning specifically the family home as the principal asset they will leave.

Given that Inheritance Tax applies to all eligible wealth at 40%, you can see why the taxman might be rubbing his hands with glee.

However, any financial adviser worth his salt will tell you that, with a little financial planning, Inheritance Tax is the most avoidable tax of all, and can be minimised or eliminated completely by putting the correct structures in place.

Each person has an Inheritance Tax allowance of £325,000 (double that for a couple to £650,000). Where the value of your wealth exceeds that allowance, it is subject to Inheritance Tax at 40%.

While these ‘nil rate band’ allowances seem generous, they apply to your whole estate.

This consists of your home, other properties, savings and investments, insurance policies, other assets, and cars. Take away the amount of your debts and liabilities upon death, and you have the net value of your estate.

Life insurance in trust

By using a trust you can move assets out of your estate, so that their value does not push your net worth up towards the threshold at which you become liable for Inheritance Tax.

By filling out a simple form when taking out a life policy, you can hold the life insurance in trust so that the cover does not inflate the value of your estate. An added advantage is that the payout from the life insurance policy will not be held back upon your death, but paid quickly and efficiently to your family.

Inheritance Tax exemptions

One tax-savvy way to transfer wealth to your children is by making gifts that are not subject to Inheritance Tax - so-called Inheritance Tax exemptions.

There are various kinds of IHT exemptions, subject of course to the limitations of the Inheritance Tax allowances:

• Spouse exemptions
• Small gift exemptions, of up to £250 to any number of persons in a given year
• Annual exemptions to your children of £3,000 per year
• Wedding exemptions of £5,000 to a child or £2,500 to a grandchild when they marry
• Regular gifts of a ‘reasonable size’ to be classed as part of your normal expenditure – for instance maintenance payments or funds for a child in full-time education

There are also a number of ‘potentially exempt’ gifts, known as potential exempt transfers or PETs.

These are only ‘potentially’ exempt because they are not immediately free of tax. You must survive for 7 years after making the gift, before it becomes tax exempt. In other words, a gift made in 2010 becomes tax-free only if and when you have survived until 2017.

The most common PET is probably the family home, transferred to your children and becoming tax-free 7 years later.

There is one important catch with regard to transferring your home, however. If you continue to benefit from the home, by living there, it is classed as a ‘gift with reservation’ and is still subject to tax.

This can be avoided if you set up an arrangement to pay your children rent at a commercial rate, in which case you are viewed as a tenant.

Source: Aviva online poll of 1,337 UK adults

Writing a will is crucial to ensure a smooth process of wealth transfer for your family, and efficient inheritance planning can save you thousands in Inheritance Tax (IHT).

If you have no will in place, you have made no formalised plan for dividing up your estate when you die. It could also leave large portions of your wealth subject to Inheritance Tax, which is paid at 40% on any funds above the tax threshold (currently £325,000 per person or £650,000 for a married couple). As a result, it is possible that proper will planning could pay for itself many times over, through savings on tax and legal costs.

Furthermore, the data implies that 65% of people with children under 18 have not written a will, potentially leaving their children without a formalised inheritance. A will can also nominate preferred guardians for children, if they are orphaned before they turn 18.

If you die without a will (known as dying intestate), specific rules apply to dividing your wealth. Contrary to popular belief, a surviving spouse is not automatically entitled to inherit everything.

In the case of a married couple in England and Wales, the surviving spouse receives only the first £125,000 from the estate, plus a half of the remainder, with the other half of the remainder passing to the children when they turn 18. (In N. Ireland the spouse receives the first £250,000; in Scotland the rules depend on what other family members exist)

Furthermore, an (unmarried) partner is not automatically entitled to a penny - the idea of a common law husband or wife with similar rights to a married spouse is a myth.

Danger of an out-of-date will

The research also concluded that, of those who do have a will, 4 out of 5 have not updated them in the past 10 years.

At the same time, 10% of people have undergone a change of relationship (i.e. divorce or remarriage) in the last 10 years and have not updated their wills to reflect this. This could mean that their estate could still be left to a previous partner, with their current partner losing any entitlement.

From an inheritance planning point of view, an out of date will can be as bad as no will at all.

Property Issues

Of those who have not revised their wills in 10 years, 23% have bought or sold a property in that time, which means that their will does not reflect their property ownership.

Investment Issues

The same would be true of any new savings accounts or investments made during that time. Almost a third of respondents (31%) said they had made significant investments in the last 10 years, which would not be included in their will.

*Survey of 2,005 British adults by Opinium Research, weighted to nationally representative criteria, published by Unbiased.co.uk

The amount of cash in badly-performing so-called ‘dog’ funds has almost doubled in the past year, from £7.2bn on 31 December 2008 to £14.22bn at the end of September 2009.

The report, by the UK investment manager Bestinvest, highlights those funds which have over the past three years consistently failed to beat the stock-market indices they aimed to outperform. To qualify for the ‘dog’ label, an investment fund must also have underperformed its index by at least 10 per cent over three years, on a cumulative basis.

The Bestinvest report highlights 78 investment funds that qualify by these criteria as underperformers.

Most alarmingly, this means that 11.6% of all actively managed funds in the UK market are now in the ‘dog’ category.

The report examined all UK-registered open-ended retail funds, such as unit trusts and OEICs.

The report has highlighted a high degree of ‘investor inertia’ in failing to work with their financial adviser to monitor their investments, and revising their financial planning by switching to better performing funds.

In response to the report, financial experts have defended the concept of actively managed funds, where a fund manager is in place who makes decisions on investing the fund across a spread of asset classes, in order to minimise risk. An active fund manager can respond to signs that markets are about to fall, by moving the investments into cash or other safe assets.

This is in contrast to passively managed ‘tracker’ funds, which do not have a fund manager, and seek to mirror or follow an index, but not to beat it. A tracker fund is, therefore, compelled to follow the markets, no matter whether the direction be up or down.

The charge will apply to any Inheritance Tax not settled within the statutory six month period from the death of the owner of the estate. Previously, since March 2009, interest due on late payments of Inheritance Tax had fallen to nil.

HMRC has stated that the ‘Interest is not a penalty, but compensation for tax paid late.’  The increased interest charge will be complemented by an interest payment of not less than 0.5%, given as a refund to those who pay more Inheritance Tax than they should.

Where it does apply, Inheritance Tax is levied on all eligible monies at a flat rate of 40%.

For purposes of Inheritance Tax planning, an individual has a tax-free allowance, i.e. a threshold that must be reached before Inheritance Tax becomes payable. This is known as the ‘nil rate band’, and for an individual is pegged at £325,000 for 2009/10, rising to £350,000 for 2010/11. Spouses are taxed separately for Inheritance Tax, so that a couple has a joint allowance of £650,000.

Inheritance Tax is paid on the value of an individual’s ‘estate’, which includes much more than just the value of his or her home. It includes all properties, assets, investments, savings, and insurances that pay out upon their death. These are then reduced by the settlement of any debts and liabilities, to give the net value of the estate.

Where the estate’s worth exceeds the nil rate band of £325,000, Inheritance Tax applies at 40%.

The good news is that Inheritance Tax has been called ‘the most avoidable tax of all’, and with a little estate planning and good financial advice, it can be significantly reduced, or avoided altogether.

To use a simple example: a widow owns property worth £200,000 and savings and investments worth another £50,000. She also has life insurances written in favour of her children, worth a further £300,000. Upon her death, her total wealth is therefore £550,000. This is reduced by debts of £25,000 so that the net value of her estate is £525,000. Her Inheritance Tax allowance is £325,000, which leaves £200,000 subject to Inheritance Tax allowance at 40%. The Inheritance Tax bill payable by her children is therefore £80,000.

The tax bill in this example was entirely avoidable.

A good financial adviser would have set the life insurance up ‘in trust’, which would have meant it would not have counted towards the value of her estate. This would have reduced the net value of her estate (after payment of her debts) to £225,000 – well within her tax allowance, so no Inheritance Tax to pay. This is only one of several Inheritance Tax exemptions, which offer opportunities to reduce or avoid Inheritance Tax.

Get under the covers (life cover, health cover, & income protection)

If you haven’t got them already, you should seriously consider both life insurance and health insurance as a married couple. Life cover will probably be required to guarantee your mortgage repayment, but do consider extra cover for your spouse and family to compensate for the loss of income, if they lose you. Also consider separate policies, rather than joint cover. For just a little extra, you have two policies, so that the surviving spouse is still covered after the first one dies. In health insurance, a critical illness policy insures you against being unable to work due to events such as heart attack, stroke, or cancer, and pays out a single lump sum which could, for instance, clear your mortgage. Income protection insurance, on the other hand, pays out a monthly sum to replace your salary in the same situations.

Write life policies ‘in trust’

When taking out a policy, ask your financial adviser to set up your life insurance in trust. This moves the policy outside your ‘estate’ (the bundle of assets that make up your wealth) so that it can be paid to your family right away, if you die. The insurance money will not be tied up while solicitors go through the formalities of sorting out your assets (‘establishing probate’), which can take upwards of three months. It will also protect your insurance from the prospect of inheritance tax at 40%.

Consider your mortgage options

These days, seeking a first time buyer mortgage generally involves at least a 10% deposit and then some careful choices – preferably based on good advice from a qualified expert. What mortgage do you choose – a fixed rate or variable rate mortgage? Your adviser can also help you present a strong application which ‘ticks all the right boxes’ with the mortgage lender.

Look at your pension provisions

You need to set up a pension plan, now that you are a couple, perhaps soon a family. In drawing up your pension you can name your spouse as its beneficiary, in case you die before retirement.

Options for the self-employed

If you are self-employed and your spouse is not working, you can take on your spouse as an employee, pay them just under the taxable rate (between £4,940 and £5,715 a year), thus rendering that amount of your family income tax-free. You can also set up a pension of up to £5,000 p.a. for your spouse, who will also qualify for the second-level state pension as well.

Take control of inheritance planning – make a will

By making a will, you take control of the welfare of your spouse and family after your demise, and ensure they get everything. Put another way, if you fail to make a will, other relatives could have a claim on parts of your wealth. In a worst-case scenario, your spouse might have to sell your house, in order to meet your obligations to those relatives. 

All the more important, therefore, that you have a will that is valid, specific and above all, up to date. Here are our top tips for getting your intentions down on paper, in a way that is clear and indisputable.

First, write your will!

This may sound obvious, but too many people put off writing a will because they believe that all their goods and chattels will go to their spouse in any case. Not so! If you die ‘intestate’ (i.e. without having made a will), parts of your wealth could be distributed to your wider family circle as well. To meet this obligation, your home might have to be sold, leaving your spouse on the street.

Use your will to safeguard your children

In your will, you can nominate who should take care of those of your children still under the age of 18 when you die. If you have no will, this could be left to a judge to decide.

Ensure your will remains valid

If you marry or enter a civil partnership, your previous will is rendered invalid.

Know the limitations of your marital status

First, unmarried cohabiting couples who have no will may have no claim on their partner’s wealth. They would have to hire a solicitor to assert their claim; how much less stressful, quicker and cheaper it would have been to make a will in the first place. Second, if you are separated, but not divorced, your ex-spouse may be entitled to claim your house. Third, if you have married a second time, but not updated your will with the name of your second spouse, your first spouse will still feature as your named beneficiary.